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Accenture (ACN) to Boost Cybersecurity with DPS Acquisition

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In an effort to improve its government security portfolio, the global IT services provider Accenture Plc (ACN - Free Report) recently inked an agreement to acquire Defense Point Security, LLC (DPS). However, the financial details of the transaction were kept under wraps.

Rationale Behind Acquisition

Based in Alexandria, VA, the privately held cybersecurity company, DPS, was founded in 2007. The company is well known for providing advanced cyber defense solutions to the U.S. federal government. Additionally, DPS is specialized in providing advanced Security Operations Center (SOC) expertise, cyber operations, security engineering and cyber analytics to the same.

Upon successful completion of the acquisition, Accenture intends to integrate DPS business with the Accenture Federal Services business, a wholly-owned subsidiary of Accenture LLP. The company claims that its “federal business has served every cabinet-level department and 30 of matt the largest federal organizations”.

Therefore, the latest deal is expected to expand Accenture’s federal services capabilities as well as strengthen its leadership position in providing cybersecurity solutions to the U.S. federal department.

David Moskovitz, chief executive at Accenture Federal Services, said that “The addition of DPS’ specialized cyber defense tools and methodologies, together with our powerful client insights, will further propel our strategy to be a leading provider of end-to-end, federal enterprise security services.”

Acquisitions – A Key Growth Strategy

Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. So far this year, the company has either completed or has signed about eleven acquisition deals across various business segments, including IT security, CRM capabilities, strategy consulting, etc. Last year, it had closed 21 takeovers.

These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden the product portfolio, and maintain its leading position. A strong cash balance of $3.50 billion and an operating cash flow of $2.52 billion at the end of third-quarter fiscal 2016 will support Accenture’s inorganic growth strategy.

Bottom Line

Accenture’s long-term prospects look promising due to sustained focus on new and innovative product launches, continuous investments in enhancing digital and marketing capabilities, as well as major acquisitions. Moreover, we believe that regular acquisitions will significantly contribute to the company's revenue stream.

However, increasing competition from Cognizant Technology Solutions (CTSH - Free Report) , International Business Machines Corporation (IBM - Free Report) and CoreLogic, Inc. (CLGX - Free Report) remains a concern. Also, we are cautious about its near-term performance, given a strained IT spending scenario. As per a research report by Gartner, worldwide IT spending is expected to remain flat year over year in 2016 at $3.41 trillion, due to currency fluctuations triggered by the Brexit episode.

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